Why Do Share Prices Change Apart From Company Profit or Loss in the Stock Market?

First…

Share price is not controlled by one thing.

It is controlled by expectation about the future.

Not just what is happening now.

Let Me Explain With a Simple Story

Imagine Baba Musa owns a yam farm.

Today, his farm is doing well.

But suddenly people hear that:

• next year there may be drought
• or fertilizer price will rise
• or government may ban export

Even if his farm is still producing well today…

People may start offering lower prices for his farm.

Why?

Because they are thinking about the future.

That is exactly how the stock market works.

Oya… Let’s Break Down the Real Factors

Apart from buying/selling and profit/loss, here are the major forces:

1. Future Expectations (VERY POWERFUL)

This is the biggest driver.

If investors believe:

• the company will grow
• expand
• increase revenue

Price goes up.

Even if current profit is small.

If they believe future will be bad…

Price falls — even if current profit is good.

2. Interest Rates (Central Bank Decisions)

When interest rates rise:

• borrowing becomes expensive
• businesses may slow down
• investors move money to safer assets

So stock prices may fall.

When rates fall:

• businesses grow easier
• investors prefer stocks

Prices may rise.

3. Inflation

If inflation is high:

• cost of production increases
• consumers buy less
• company profit may reduce

So investors adjust prices downward.

4. Government Policies & Regulations

New policies can change everything overnight.

Examples:

• new taxes
• import bans
• subsidies removal
• banking regulations

A single government decision can move share prices sharply.

5. Industry Performance

Sometimes it’s not the company…

It’s the entire sector.

For example:

• if oil prices crash → oil companies fall
• if banking rules change → bank stocks move

So even a good company can fall because its industry is struggling.

6. Company News (Beyond Profit)

Things like:

• new CEO appointment
• scandals or fraud
• expansion into new markets
• mergers and acquisitions

All these affect investor confidence.

7. Dividends

If a company:

• increases dividend → price may rise
• cuts dividend → price may fall

Because investors love consistent income.

8. Global Events

Even if a company is in Nigeria…

Global issues can affect it:

• war
• oil price changes
• foreign exchange rates
• global recession

Everything is connected.

9. Market Sentiment (Human Emotions)

This one is powerful and dangerous.

Sometimes prices move because of:

• fear
• greed
• rumors
• hype

Not logic.

That’s why markets sometimes:

• rise too fast
• fall too hard

10. Liquidity (How Easy It Is to Buy/Sell)

If a stock is:

• actively traded → price moves smoothly
• rarely traded → price can jump suddenly

Let Me Be Honest With You

Even experts cannot predict price movements perfectly.

Because:

The market is a mix of logic and human emotion.

Final Truth

Profit and loss tell you about the present.

But share price reflects:

👉 what people BELIEVE about the future.

Let Me Leave You With This

Many beginners ask:

“Why did the price fall? The company made profit.”

But the real question is:

“What did investors EXPECT… and what actually happened?”

Because once you understand that…

You stop being confused.

And you start thinking like a real investor.

I am Rose Ejituru

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